1. Today we are going to learn more about :-
Stakeholders in
The Stakeholder Model

2. Learning Objectives By the end of today’s lesson you:
MUST be able to explain the definition of stakeholders in a business.
SHOULD be able to categorise different types of stakeholders and key differences
COULD be able to apply this to a selected organisation and evaluate the outcome

3. Pressures on Business
Competitive pressures – Modern business faces greater competitive pressure:
More open markets
Globalisation
Shareholders seeking ever higher profits

4. Pressures on Business
Pressure of responsibility - Growing importance to consumers of ethical business:
Total UK sales of Fair Trade products grew in 2004 by more than 50% to £140 million
Environmental legislation

5. How Should Firms Respond?
‘Inclusivity’:
Take a wide view of why the firm exists
Recognise range of interest groups
Form partnerships with wide range of groups

6. What’s Different About This?
Firms used to aim for maximum profits to keep shareholders happy
This was often against interests of groups outside organisation
Now, interdependence seen as vital
Partnerships with all interest groups

7. What Does This Mean?
Difficult to balance the different short term demands of shareholders and stakeholders
Firms can benefit considerably from cooperating with stakeholder groups
Their needs can be built into the firm’s decision making processes

8. Benefits Firms Can Expect
Better public relations
More favourable reporting of firm’s activities in media
Quality relationships with suppliers
Lower staff turnover

9. Benefits Firms Can Expect
Higher employee motivation
Reduced impact of pressure groups on firm’s activities
But only if firm genuinely commits to stakeholder model.

10. Meeting the Needs of Stakeholders
BTEC Business

11. What are Stakeholders?
Stakeholders are groups of people who have an interest in a business organisation
They can be seen as being either external to the organisation, or internal
But some may be both!

12. Definition of "stakeholder" Business
party with vested interest in firm's success a person or organisation with a legitimate interest in the successful operation of a company or organization. A stakeholder may be an employee, customer, supplier, partner, or even the local community within which an organisation operates.

13. Types of Stakeholder I = Internal E = External Owners (I)
Shareholders (I)
Managers (I)
Staff or employees (I)
Customers (E)
Suppliers (E)
Community (E)
Government (E)
I = Internal
E = External

14. Internal and External Stakeholders
Internal stakeholders are those who are ‘members’ of the business organisation
Owners and shareholders
Managers
Staff and employees
External stakeholders are not part of the firm

15. But…..! Some groups can be both internal and external stakeholders
Such as staff or shareholders who are also local residents
Can you think of any others?

16. Characteristics of Stakeholders
1. Owners and Shareholders
The number of owners and the roles they carry out differ according to the size of the firm
In small businesses there may be only one owner (sole trader) or perhaps a small number of partners (partnership)
In large firms there are often thousands of shareholders, who each own a small part of the business

17. Characteristics of Stakeholders
2. Managers:
organise
make decisions
plan
control
are accountable to the owner(s)

18. Characteristics of Stakeholders
3. Employees or Staff:
A business needs staff or employees to carry out its activities
Employees agree to work a certain number of hours in return for a wage or salary
Pay levels vary with skills, qualifications, age, location, types of work and industry and other factors

19. Characteristics of Stakeholders
4. Customers:
Customers buy the goods or services produced by firms
They may be individuals or other businesses
Firms must understand and meet the needs of their customers, otherwise they will fail to make a profit or, indeed, survive

20. Characteristics of Stakeholders
5. Suppliers:
Firms get the resources they need to produce goods and services from suppliers
Businesses should have effective relationships with their suppliers in order to get quality resources at reasonable prices
This is a two-way process, as suppliers depend on the firms they supply

21. Characteristics of Stakeholders
6. Community:
Firms and the communities they exist in are also in a two-way relationship
The local community may often provide many of the firm’s staff and customers
The business often supplies goods and services vital to the local area
But at times the community can feel aggrieved by some aspects of what a firm does

22. Characteristics of Stakeholders
7. Government:
Economic policies affect firms’ costs (through taxation and interest rates)
Legislation regulates what business can do in areas such as the environment and occupational safety and health
Successful firms are good for governments as they create wealth and employment

23. Is this a Stakeholder or Not?!

24. Factors influencing scale
Existing size of business
Type of product of service
Owner’s ambitions
Size of market
Factors influencing scale
Competition
Existing skills and knowledge
Tutors may wish to discuss each of the above factors and how it affects the potential scale. For example:
A very small business would struggle to operate on a large scale because of numbers of staff/expertise.
Some products/services are only attractive to a local market (e.g. food specialities – jellied eels/black pudding); others have global appeal, e.g. mobile phones, blockbuster films.
Some knowledge of specific cultures/language is essential for international or global operation.
Expansion may require branch offices/production facilities overseas/advertising in different languages/appointment of foreign agents to promote goods etc – all these cost money.
If competition is intense then international expansion may be risky, e.g. clothes, footwear. If specialist service is offered then international expansion may be much simpler, e.g. Red Adair (firefighting oil fires).
Some entrepreneurs are quite happy to operate on a local basis (accountants/estate agents etc in local town) a regional basis (shop owners with regional branches) or a national basis (eg Richer Sounds). Others aim for global dominance where possible (McDonald’s, Microsoft).
Cost of operating over a wider area
Cost of expansion